Revenue and ad sales fell in Q1

Viacom, which is exploring a merger with CBS, raised its forecast for full-year revenue from U.S. cable and satellite companies on Thursday, sending its shares up as much as 12 percent.

The revised forecast comes at an important juncture for Viacom as the company and CBS, both of which are controlled by Sumner and Shari Redstone, announced last week they had set up special committees to explore a merger.

The two companies had explored a merger in 2016 at the urging of the Redstones, but those talks had failed, largely because it was not clear how to structure a deal that made sense for CBS shareholders.

However, Viacom’s positive outlook may ease those concerns.

“I feel very good about our trajectory … far better than I felt this time last year,” said Viacom Chief Executive Bob Bakish said on a conference call.

Shares of Viacom were up 9 percent in early afternoon trading at $33.25, after earlier jumping as much as 12 percent. CBS shares were down 1.5 percent $53.63.

Improving relations with distributors has been a focal point for Bakish since he took over as CEO in 2016. As more viewers cancel their cable and satellite subscriptions in favor of watching their favorite shows online, distributors are less likely to pay for Viacom’s programs.

A deal between CBS and Viacom would pair CBS’ broadcast network, TV studios and Showtime cable network with Viacom’s Paramount Pictures and networks, giving the combined company scale and more leverage with cable and satellite companies.

Viacom is in discussions with wireless operators in the U.S. and abroad to drive incremental revenue, executives said on the call.

For fiscal 2018, Viacom expects U.S. affiliate sales to decline by low to mid-single digit percentages, compared with an earlier forecast of a mid-single-digit decline, Bakish said.

The company’s net profit jumped to $535 million from $396 million in its fiscal first quarter ended Dec. 31, largely driven by cost-cutting efforts.

Viacom’s U.S. sales through cable and satellite companies dropped 8 percent due to declines in the number of people paying for cable and lower revenue from online streaming services.

The company also reported a 5 percent decline in U.S. ad sales, but said it expects U.S. ad revenue to be positive in the fourth quarter.

Total revenue fell 7.6 percent to $3.07 billion in the quarter, missing analyst estimates for $3.14 billion, while total expenses dropped 10 percent to $2.26 billion.

Excluding items, the company earned $1.03 per share, beating the average estimate of 94 cents.